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27

11

Conclusions

The research in this report shows that Labour Party’s proposed mansion tax will impact an increasing

number of UK family homes in the 2016-2020 forecast period, making home ownership less affordable

amongst already increasing property taxes. Even as the £2m threshold for 2016 is increased in line with

growth in the high-value property market, new properties are dragged into the “mansion” category.

Due to this ‘fiscal drag’ effect the number of UK family homes that are below the 2016 mansion tax

threshold but become subject to the mansion tax by 2020 is 2,163. This marks a 2% increase in number

of taxable family homes from 2016 to 2020. In London the increase over the same period is much more

striking, as the number of taxable homes increases by 6%. Many of these homes are not mansions in the

conventional sense of the word – they are just typical family homes that have been brought into the

mansion tax bracket due to house price inflation.

An analysis of the London homes subject to the 2016 mansion tax reveals that the taxable family homes

are disbursed amongst a range of boroughs. The borough with the highest proportion of affected homes

is Kensington and Chelsea followed by City of Westminster, Camden, Hammersmith and Fulham, and

Wandsworth. The boroughs with the highest proportion of family homes

that will become

subject to the

mansion tax post-2016 are Hammersmith and Fulham, Kensington and Chelsea, Wandsworth, Richmond,

City of Westminster, and Camden.

In contrast to the usual images associated with the term “mansion”, a further breakdown of the 80,763

family homes in London which will be subject to the 2016 mansion tax, shows that 46% are terrace

houses, while 21% are detached. Also, 68% are in parliamentary constituencies with a Conservative MP

and 28% in Labour constituencies. However if just those homes that become subject to a mansion tax

after 2016 are taken into account, 58% are in Conservative and 33% in Labour constituencies.

When the issue of family home taxation is considered more broadly, the mansion tax payment comes on

top of an already increasing financial burden on home owners. In the 2016 to 2020 period the proportion

of London homes subject to 0%, 1%, and 3% stamp duty decreases for all three bands, while the

proportions of homes in the 4%, 5%, and 7% bands all increase, assuming current policy does not change.

In addition to considering the rising financial burden on family homes, another issue that must be

deliberated on is the cost and method of the home revaluations that would become necessary if the

mansion tax was to be implemented. The proposed policy’s effect on other sources of revenue, e.g.

income taxes and stamp duty, also must be considered along with the impact on cash-poor asset-rich

homeowners, many of which are pensioners. Cebr expects the net impact of the mansion tax will be to

raise considerably less than £1.2bn in revenue.

© Centre for Economics and Business Research